What Does the STATES Act Mean for Cannabis Legalization?

The proportion of Americans in favor of medical marijuana legalization has now reached two-thirds of the population, while the number of states that allow medical weed at least has effectively reached that level, too. The current Congress is the most pro- cannabis one in history, yet they are nowhere near getting legalization over the line.

At present, we have Democrats fighting with fellow party members over whether to focus on industry issues like banking or social justice. Advocates for the herb are torn between seeking full legalization or accepting less broad legislation. A majority of Republicans are still against federal legalization. In other words, despite a wave of support, the entire issue remains a complete mess!

A multitude of pro- cannabis bills has been filed in the last few years. One of the most recent, the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, was filed by Kamala Harris and Jerrold Nadler in July 2019. The goal of MORE is to remove weed and THC from the Controlled Substances Act (CSA). It also calls for a 5% federal tax on the herb and includes provisions to expunge and resentence individuals previously convicted of marijuana crimes.

There are also several bills, filed some time ago, that aren’t going away but are unable to get far enough to make a difference. The Strengthening the Tenth Amendment Through Entrusting States (STATES) Act is one such piece of legislation. It was introduced during the 115th Congress in June 2018 by Cory Gardner and Elizabeth Warren.

What is the STATES Act?

The primary purpose of the STATES Act is to allow American states to decide if they want to legalize medicinal or recreational weed, without interference from the federal government. At present, we have a situation where the feds and individual states regulate the use, growth, possession, and sale of marijuana. Weed is legal for recreational use in states like California but is still illegal under federal law.

The result is a complete legal mess, and marijuana businesses have no idea what to do. For instance, they are unable to transport cannabis across states lines, even if it is from one legal state to the next. You may not be aware, but there is a division of the Treasury Department called The Financial Crimes Enforcement Network (FinCen) which places marijuana businesses in three distinct tiers.

Tier 1 typically involves distributors and growers who ‘touch the plant.’ Tier 2 normally includes packaging companies who don’t ‘touch the plant’ directly. Tier 3 are providers of the services and goods used by the other two tiers. Tier 3 companies are the least likely to be prosecuted under the CSA; Tier 1 firms are at the highest risk.

In essence, the STATES Act would amend the CSA and ensure that corporations or individuals in states and territories where marijuana is legal (tribal laws are included) are exempt from it. In other words, you would no longer have to worry about federal interference if you operate a business, use, or possess weed in a location where it is legal to do so.

The STATES Act also had banking provisions that were reintroduced as the SAFE Banking Act by Ed Perlmutter and Jeff Merkley in March 2019 during the 116th Congress. This bill is designed to impact the ability of federal banking regulators to intervene with depository institutions involved in the legal marijuana industry.

At present, any banking institution that deals directly with a legal marijuana enterprise will find their deposit or share insurance limited. The SAFE Banking Act would also prevent regulators from barring financial institutions from doing business with a cannabis company.

What Would Happen if the STATES Act Was Passed?

By June 2019, the STATES Act had over 200 cosponsors in the House and 30 in the Senate. President Trump suggested that he would ‘probably’ support it, but hasn’t made any utterances on the subject since. It was reintroduced in April 2019 as part of the 116th Congress, but no further progress has been made.

One of the reasons why some Democrats are against the Act is because it does nothing to address social or racial concerns. For instance, the STATES Act doesn’t discuss measures to reinvest in communities disproportionately impacted by cannabis’ prohibition. Some supporters say that while it doesn’t go far enough, it would be a significant step towards full legalization.

While this is undoubtedly true, it is worth remembering that the STATES Act does NOT fully legalize marijuana. Instead, it will only be legal in states and territories that already allow it, and will remain a Schedule I controlled substance in states such as Nebraska, where it remains completely illegal.

At the very least, however, the STATES Act could provide solace for marijuana companies currently forced into taking extreme measures due to a lack of banking services. At present, it is impossible to get a business loan if the purpose is to become involved in the weed industry. Also, you can’t even place your company’s deposits in a bank. Therefore, it is necessary to invest in a safe and risk having huge sums of money on your premises; making it a prime target for thieves.

Passing the STATES Act would also remove the possibility of a tyrannical federal government one day deciding to enforce the law in states where cannabis is legal. It is unclear what the Act would do for interstate commerce. The language of the bill suggests that it will be permitted to transport marijuana across state lines as long as you travel from one legal state to another.

One of the most exciting possible effects of the STATES Act relates to marijuana and firearm use. In 2011, the Bureau of Alcohol, Firearms, and Explosives ruled that cannabis users, even those with a valid MMJ card, are not legally allowed to own a firearm.

As the STATES Act would allow weed consumption in compliant states, and since the ATF says the federally illegal status of cannabis is the reason why firearms are banned if you use it, there is a strong possibility that marijuana users will regain their right to bear arms. Of course, you may still get into trouble if caught in possession of a gun while stoned! Realistically, the ATF will challenge such a ruling if it happens.

One final point worth mentioning regards the fact that the STATES Act protects against actions that don’t violate the CSA with respect to any other substance. In other words, if you are caught in possession of heroin AND marijuana, even in a state where weed possession is legal, you will be open to a federal charge for the use of cannabis, as well as for possessing heroin.

The STATES Act: What’s Likely to Happen Next?

The short answer is ‘nothing.’ At least for the time being. As long as Mitch McConnell serves as the Senate Majority Leader of a Republican-controlled Senate, the STATES Act and all other pro- marijuana legislation will remain on ice. The SAFE Banking Act probably has the best chance of succeeding. It cleared a critical House committee in March and received a Senate hearing.

Those who supported the legislation (such as the American Banking Association) optimistically predicted that it would receive floor passage by August 2019, but it didn’t do so. Perlmutter hopes that the bill will come to a House vote before the end of the year, and has pledged to become a ‘noisy member of Congress’ to help push the legislation through.

One of the advantages of the SAFE Banking Act is that it isn’t calling for a sea-change in marijuana legalization, but could prove to be the first step towards it happening! Eventually, House Democrats need to get together and agree on a bill to pass it. Even when this happens, they have to try and get it through the Senate; seemingly an impossibility with anti- marijuana McConnell standing in the way.

At present, the only feasible way that the STATES Act, or any other piece of pro- marijuana legislation, will even make it to the floor of the Senate, is if it is attached to a ‘must-pass’ package. In reality, McConnell will do everything he can to avoid giving weed even a second of floor time.

As a result, we must wait for the results of the 2020 elections. If we end up with a Democrat as the President and the Republicans lose control of the Senate, it is a very different ballgame for cannabis.